The Real Estate Market in London: Buy Now?


Buying a house is a turning point in everyone’s financial life. There are always countless questions and with all the technical data related to inflation, mortgage rate, and everything else, it is not easy to decide if purchasing a property is a reasonable financial move.

Over the past year, house prices have soared in London due to some reasons such as Covid-19. However, as mortgage rates and the cost of living have surged, property prices are starting to fall.

In this post, we are going to discuss what is happening in London’s real estate and if it is a good time to buy a house.

Why Are House Prices Falling?

According to Nationwide which publishes figures on average house prices once a month, the average house price in October was £268,282, a 0.9% fall from September. This is the largest monthly drop in prices since June 2020 when Covid-19 was at its peak.

The main reason for the recent reduction in house prices is the squeeze on household finances caused by rising mortgage rates and the cost of living. The Bank of England raised the base rate to 3% in November, which is the highest since 2008.

The rise in the rates makes it even more expensive to borrow money. This means that fewer buyers can now afford mortgages and the prices may fall even more. According to the Bank of England, mortgage approvals for house purchases fell from 66,000 in September to 59,000 in October.

Why Is Now Still the Best Time to Buy?

Many people, especially first-time buyers, hope to see house prices fall even further so they can purchase a house more easily, but is it the best decision now?

The truth is that even now, buying a home is the correct move for some reasons. Rents will continue to reach new record highs soon, meaning that you may end up paying a lot more in rent than you would in mortgage repayments if you delay your house purchase.

If you purchase your house now, you will no longer worry about your landlord raising your rent or even giving you notice to move out of your home. Also, when you purchase your house and move out of a rental property, you would be paying your own mortgage instead of someone else’s.

Currently, there are many predictions of house prices, but the recent fall in prices is temporary. Plus, you may wait a long time for additional reduction of prices but hit rock-bottom. As soon as the interest rates start to fall, there will be a demand increase which would increase house prices immediately.

House prices will highly likely increase again, but another downside of delaying the purchase is that you will be able to secure a cheaper mortgage in this case. What’s more, those who tend to stay in their house for at least three years can survive the suspected downturn in prices.

Another thing to consider is that if you put down a large deposit, you will survive the possibility of facing negative equity when the value of your house is less than the amount you must still pay on your mortgage.

For all of these reasons, in addition to the expected reduction of mortgage rates due to the near future stability of the market, now is in fact the best time to purchase your dream home.

Is the Luxury Real Estate Market Affected by the Rise in Interest Rates?

Despite all the recent increases in mortgage rates and inflation, the luxury real estate market in London has remained almost intact. Buyers of luxury properties are always interested in investments, regardless of the interest rates.

On the other hand, the pound plummeted to an all-time low in September, making many Americans or others who pay in USD more willing to purchase prime London properties.

The luxury real estate market is primarily focused on properties that are £3 million or more. That is where the exchange rate savings start to count for homebuyers paying in USD. That said, the current economic situation in the UK will not very much affect the luxury real estate market.

If you are looking for investment opportunities in the UK, or would like a marketing appraisal for your luxury property, please contact our specialist realtors who will provide you with an up to date market information and help you in your journey.

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